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Rodriguez-Hernandez v. K Bread & Co., Inc.

United States District Court, S.D. New York

May 23, 2017

NEREO RODRIGUEZ-HERNANDEZ, individually and on behalf of others similarly situated, Plaintiff,
v.
K BREAD & COMPANY, INC. and ALEXANDER KIM, Defendants.

          MEMORANDUM DECISION & ORDER

          KATHERINE B. FORREST, District Judge.

         The protracted procedural history in this case, brought under the Fair Labor Standards Act (“FLSA”), has been set forth by the Court in numerous previous decisions and orders. (See, e.g., ECF Nos. 51, 56, 60, 63.) As detailed in those decisions and orders (and highlighted below), the parties settled their dispute in October 2016. At that time, however, they mischaracterized their settlement as an “offer of judgment” to the Court. At that time and thereafter, plaintiff maintained that the accepted “offer of judgment” was not subject to review by this Court. The Court suspected-and subsequent filings have confirmed-that these efforts were undertaken by plaintiff's counsel in order to receive an unreasonably high award of attorney's fees.

         At long last, the parties have submitted their settlement agreement to the Court for review and approval pursuant to Cheeks v. Freeport Pancake House, Inc., 796 F.3d 199, 206 (2d Cir. 2015), cert. denied, 136 S.Ct. 824 (2016). The proposed settlement is for a total of $25, 000. (ECF No. 61.) Terms of the proposed settlement provide that plaintiff Nereo Rodriquez-Hernandez is to receive $14, 284.10 and $10, 715.90 is to be awarded for attorney's fees, costs, and expenses. (Id.) In other words, the proposed settlement allocates 43% of the total award to attorney's fees and costs.

         The proposed settlement agreement makes clear what the Court has suspected throughout this litigation-that the settlement was likely mischaracterized because of a desire by plaintiff's counsel to receive an unreasonably high attorney's fee award and shield such award from review by this Court. The Court has previously condemned the behavior by plaintiff's counsel and does so again here. (See ECF No. 66.) The Court considered, but ultimately decided against, entering sanctions.

         For the reasons discussed below, the Court APPROVES the proposed settlement agreement pursuant to the modifications set forth below. Importantly, the Court reduces the amount of attorney's fees awarded to plaintiff's counsel and awards that additional amount to plaintiff, as discussed below.

         I. BACKGROUND

         Plaintiff Nereo Rodriquez-Hernandez commenced this action under the Fair Labor Standards Act (“FLSA”) and New York State labor laws on August 28, 2015. (ECF No. 1.) Defendants answered plaintiff's complaint on January 19, 2016. (ECF No. 15.) The Court subsequently referred this case to the magistrate for settlement purposes only. (ECF No. 22.) A settlement conference was scheduled before the magistrate for August 9, 2016.

         On August 8, 2016, the parties requested that the settlement conference be adjourned because “the parties, negotiating on their own, ha[d] reached terms of settlement and [were] preparing to finalize the settlement.” (ECF No. 33.) Having received the parties' notice of their settlement in principal, the Court adjourned all scheduled dates and deadlines and ordered that the parties submit any proposed settlement agreement (as well as supporting documentation) to the Court for its approval not later than September 8, 2016. (ECF No. 35.) The Court, citing Cheeks v. Freeport Pancake House, Inc., 796 F.3d 199 (2d Cir. 2015), noted that because this action was brought under the FLSA and New York State labor laws, the settlement must be scrutinized by the Court to ensure that it is fair. (Id.)

         On September 22, 2016, the Court received a letter from plaintiff notifying the Court that the parties had been unable to finalize a settlement.[1] (ECF No. 38.) As a result, the Court restored this action to the trial calendar. Trial was scheduled to commence on the date originally scheduled, October 31, 2016.

         Less than a week before trial, on October 26, 2016, plaintiff filed a “Notice of Acceptance of an Offer of Judgment.” (ECF No. 44.) Plaintiff's submission stated that “plaintiff Nereo Rodriguez-Hernandez accepts the offer of judgment served on the plaintiff by the defendants K. Bread & Company Inc. d/b/a Bread & Company and Alexander Kim on October 26, 2016, allowing the plaintiff Nereo Rodriguez Hernandez to take judgment against the defendants K. Bread & Company Inc. d/b/a Bread & Company and Alexander Kim, jointly and severally, for $25, 000.00, inclusive of costs.” (Id.) Plaintiff attached to his submission the purported “Offer of Judgment” under Federal Rule of Civil Procedure 68. (ECF No. 44-1.)

         On October 27, 2016, the Court again adjourned all scheduled dates and deadlines and ordered that the parties submit any proposed agreement (as well as documentation supporting its fairness) to the Court for its approval, this time not later than November 28, 2016. (ECF No. 47.) Rather than submit the documentation ordered by the Court, on November 29, 2016, plaintiff filed a Motion to Vacate the Court's October 27, 2016 Order. (ECF No. 49.) Plaintiff argued that because it submitted an accepted offer of judgment pursuant to Rule 68, the Court must enter judgment and the Second Circuit's decision in Cheeks-requiring Court approval of FLSA settlement agreements under Rule 41-is inapplicable. (See Memorandum of Law in Support of Motion to Vacate, ECF No. 50.)

         The Court denied plaintiff's motion to vacate on December 1, 2016. (ECF No. 51.) The Court explained that it is an open issue in this Circuit whether court approval is required of a proper Rule 68 offer of judgment in a FLSA wage-and-hour case. (Id.) The Court noted, however, that even this issue was not yet before the Court. (Id.) The Court expressed concern that what plaintiff had submitted was not a proper offer of judgment under Rule 68, but rather was a settlement under Rule 41. (Id.) The answer to that preliminary question, the Court explained, was important because if what had been presented was truly a settlement, then the Court has an approval obligation. (Id.) In order to ensure that the “offer of judgment” had not been represented as such-when it was indeed a settlement-in order to avoid judicial scrutiny, or having the effect of avoiding judicial scrutiny, the Court ordered plaintiff to submit, not later than December 16, 2016, all relevant evidence concerning the accepted “offer of judgment.” (Id.) The Court had particular concerns given the specific procedural history of this case-the parties had previously informed the Court that they had reached a “settlement” in principal. The Court ordered plaintiff to submit, inter alia, emails, other written correspondence, and records of phone conversations between counsel related to this case.[2] The Court received plaintiff's response on December 16, 2016. (ECF No. 55.)

         After reviewing plaintiff's response to the Court's order, it was clear to the Court that plaintiff's October 26 submission was not a proper offer of judgment under Rule 68, but rather was a settlement under Rule 41. (ECF No. 56.) Accordingly, the Court ordered the parties to submit their proposed settlement agreement to the Court for its approval not later than February 6, 2017. (Id.)

         On February 2, 2017, plaintiff moved this Court for a stay of this action pending their interlocutory appeal of the Court's December 1, 2016, Memorandum Decision & Order (ECF No. 51). (ECF No. 57.) This Court denied plaintiff's motion and noted that plaintiff, if it desired to do so, needed to file a request for a stay with the Second Circuit. Plaintiff then filed such a request with the Second Circuit.

         This Court explained that it would stay this action until plaintiff's motion before the Second Circuit was resolved. (ECF No. 58.) This Court also noted that the parties' time to comply with the December 1, 2016, Memorandum Decision & Order would be stayed only until plaintiff's motion was resolved by the Second Circuit. (Id.) This Court noted that it deemed the delay as unacceptable and plaintiff's appeal as entirely frivolous and procedurally improper. (Id.)

         On April 11, 2017, the Second Circuit dismissed plaintiff's interlocutory appeal of the Court's December 1, 2016, Memorandum Decision & Order for lack of jurisdiction, and denied plaintiff's motion for a stay as moot.

         Thereafter, the Court ordered that the parties comply with its previous orders not later than Tuesday, April 25, 2017. (ECF No. 60.) On or before that date the parties were required to submit their proposed settlement agreement to the Court for its approval, as well as any submissions in support of the proposed settlement, explaining why it should be approved based on the issues described in Cheeks v. Freeport Pancake House, Inc., 796 F.3d 199 (2d Cir. 2015). (Id.) The Court noted that it was the third time that it had ordered the parties to provide this information. (Id.)

         The parties submitted a responsive joint-letter and copy of their settlement agreement to the Court for its review on April 25, 2017. (ECF No. 61.) The proposed settlement is for a total of $25, 000. (ECF No. 61.) Terms of the proposed settlement provide that plaintiff Nereo Rodriquez-Hernandez is to receive $14, ...


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